terminated participant, loan repayment and distribution

[Draper55]

If a participant terminates and the plan allows for terminated participants

to continue their loan repayments, does it matter if the participant takes the balance of their account at a point in time before the loan has been entirely repaid?

[ESOP Guy]

I have never seen a plan document that allows someone to take a distribution of all their balance accept the loan balance.

Or put another way I have seen plan documents that say you take 100% of your account balance or you don't ask for a distribution. I have never seen one that say I can ask for only the cash balance of my account.

I don't think you have a document that allows what your are proposing but I guess you ought to check it to see if I am wrong.

[masteff]

To expand that slightly... if the plan permits less than entire balance to be distributed, then one option is to leave a small amount (I'd suggest $5,000 to avoid any de minimis cash out issues) and the participant can continue making loan payments.

[QDROphile]

My simple reading of the post does not include the interpretation of the responses to the effect that the participant can take a partial distribution that does not include the loan. Subject to the usual caution about following plan terms, there is nothing wrong with taking a distribution that includes a loan balance. The loan balance cannot be rolled to an IRA. In all likelihood, the balance will be taxable and will be included in the amount that is subject to mandatory withholding.